Smads Anchor for Receptor Activation (SARA) plays an important role in regulating phosphorylation of TGF-beta specific R-Smads to control their specific subcellular localization. However, BMP specific SARA remains to be identified, and little is known about how phosphorylation of Smad1 by BMP receptors is controlled. In our preliminary data, we have found that a novel SARA, SARAb, binds specifically to Smad1. SARAb, like SARA, also has a FYVE domain and a highly conserved Smad binding domain (SBD). We have demonstrated that SARAb specifically interacts with BMP specific Smad1, not TGF-beta Smad2/3. More importantly, SARAb also has a PP1c binding domain, and we have shown that SARAb interacts with PP1c. Our data suggest that SARAb facilitates phosphorylation of Smad1 in the BMP signaling pathway. SARA possesses a dual functional role in positive and negative regulation of TGF-beta signaling. When TGF-beta ligands initiate TGF-beta signaling, SARA binds to unphosphorylated R-Smads to facilitate their phosphorylation by activated TGF-beta type I receptor. Once Smad2/Smad3 are phosphorylated, SARA then facilitates a negative regulation through binding of protein phosphatase 1 (PP1c) for dephosphorylation of TbetaRI. The signaling in general is a dynamic process through phosphorylation and dephosphorylation. SARA(b) facilitates the dynamic mechanism to modulate TGF-beta/BMP activity with their dual functional ability. Our preliminary results have demonstrated that SARAb binds both Smad1 and PP1c in a similar way as SARA. We hypothesize that SARAb is BMP specific SARA and regulates phosphorylation of Smad1 and dephosphorylation of BMP type I receptor. The proposed studies are designed to extend our findings and characterize the molecular mechanism of SARAb-mediated BMP signaling and its role in osteoblast differentiation and bone formation. We will use complementary in vitro and in vivo approaches to characterize this novel SARAb-mediated BMP signaling mechanism in osteoblast cells. We will pursue: 1) characterization of the mechanisms of SARAb-mediated Smad1 phosphorylation and dephosphorylation of BMP type I receptor mediated; 2) examination of the effect of SARAb on BMP signaling and osteoblast differentiation in human primary stromal cells; 3) examination of the impact of osteoblast specific expression of SARAb on bone formation and turnover in vivo. Thus, modulation of SARAb, or its PP1c binding activity, will enhance BMP type I receptor phosphorylation, which could potentially serve as a bone anabolic drug target for osteoporosis.